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Albania

Albania
Capital Tirana
Population 2,876,000
Area 28,748 SQ KM (11,100 sq mi)
Currency lek (all)
GDP USD 11.87 billion
GDP per capita USD 4,126
FDI (2012 - 2016) USD 5,300 million
corporate tax 15%
vat 20%

GENERAL OVERVIEW

Albania is a parliamentary republic. Executive power rests with the Government. Albania held a parliamentary election on 25 June 2017.

Albania together with Croatia joined the North Atlantic Treaty Organization (NATO) on 1 April 2009. In order to become a NATO member, Albania undertook several reforms in areas such as political, military and security-sector. Priorities were set to meet democratic standards, reduce corruption, fight organized crime, improve public administration, and enhance good- neighborly relations.

In June 2014, the EU granted candidate status to Albania. Becoming an EU candidate country has a number of political and economic effects for Albania. The next important step will be the opening of accession negotiations; however, this will depend on further specific and sustainable reforms in Albania and is subject to agreement from all EU Member States.

TAX INCENTIVES

Starting from 1 January 2018, all services offered by four and five star hotels, provided they hold the special status, a trade registered mark and a worldwide recognized brand name, shall be subject to a reduced VAT rate of 6%. Targeting to promote the Albanian tourism, this change is a significant incentive for chain of registered trademarks’ hotels which may plan expanding their activities in the Balkans. Currently, any entity offering services in tourism activities regardless of the hotel rating are allowed to apply the reduced rate of 6% only for accommodation services.

We bring you here the current tax incentives policy snapshot for Albania.

Tourism

In addition, four-star and five-star hotels, shall be exempt from CIT (Corporate Income Tax) for a period of 10 years provided they have met the criteria for obtaining the special status up to December 2024. The effects of CIT exemption apply upon initiation of the business activity but not later than 3 years after receiving the special status. A decision of Council of Ministers shall determine the terms, conditions and procedures for implementing this provision.

Four-star and five-star hotels, holding the special status, a trade registered mark and a worldwide recognized brand name shall be exempt also from the payment of the tax on real estate and infrastructure tax.

In the near future, the Albanian Parliament is expected to approve also some changes to the Law on Tourism aiming to include additional definitions for accommodation structures and investors in the tourism sector. According to the expected changes, in order to qualify as a four-star and five-star hotel, the investment value should be respectively at least EUR 8 million and EUR 15 million. Accommodation structures could be hotels or resorts or a combination of them. Investors of four-star and five-star hotels with a special status should sign an agreement with the responsible Ministry in charge for tourism, where should be detailed the mutual obligations, project development terms, value of the project, limitations on transfer of the investment or part of them as well as consequences deriving from noncompliance with the agreement.

CIT and customs duty incentives for Information Technology Companies

Starting from 1 January 2018, the CIT rate for - entities operating in the Information Technology (IT) sector and dealing with software development shall be 5%. Reduce of the current CIT standard rate of 15% to 5% is an important incentive which is expected to attract new or international software development companies to register in Albania. Moreover, the approved changes in the customs duty legislation, provide for reduced customs duty rates applicable on import of equipment and devices to be used in the course of their ITC business activity.

Activities to be considered as related to the software development shall be determined separately in a decision of Council of Ministers.

Taxation of profit distributions or dividend payments

Based on Albanian tax legislation, dividends or profit paid by a foreign subsidiary owned by an Albanian entity are not included in the taxable income of the Albanian parent company.

Dividends or profit distribution paid by an Albanian subsidiary owned by an Albanian entity are exempt from withholding tax.

Tax incentives for solar panel systems

Entities and persons that produce or install solar panel systems may benefit from customs duties and value added tax exemptions on solar panel systems. When solar panel systems are produced or installed for producing hot water or for sanity purposes in buildings or technological processes in industry may be reimbursed for the customs duties paid on import of raw materials used for the production or assembly of these systems.

INDEX

Global Competitiveness Index RANK 75
Ease of doing business RANK 65
Starting Business rank RANK 45
Global logistics report RANK 117

Global competitiveness report 2017 - 2018

Rank Institutions Infrastructure Health and primary education Higher education and training Labor market efficiency Technological readiness Business sophistication Innovation
Albania 68 94 36 49 91 78 74 87

Electricity prices

EUR/kwh HOUSEHOLD NON HOUSEHOLD
  2015 2016 2017 2015 2016 2017
Albania 0.081 0.082 0.084 / / /
EU - 28 0.209 0.205 0.204 0.121 0.116 0.114

Monthly salary

Net average monthly salary (2016) € 375

Gross average monthly salary (2016) € 408

INVESTORS CONFIDENCE

“The attractive features of the area are the relatively undeveloped markets, the ability to be a first mover in many segments and continually positive economic growth in the region. Our overall experience has been quite positive. ”

STEVEN GRUNERUD, VICE PRESIDENT - MERGERS AND ACQUISITION, BALFIN GROUP
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Partners

Ebrd

Strategic partner

Karanovic Nikolic

Content partner

Confida

Content partner

I&F McCann

Communications partner